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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into AES Corp. (NYSE: AES)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 08/21/2014


End date: 08/20/2019
Start price/share: $15.07
End price/share: $15.19
Starting shares: 663.57
Ending shares: 797.24
Dividends reinvested/share: $2.30
Total return: 21.10%
Average annual return: 3.90%
Starting investment: $10,000.00
Ending investment: $12,108.15

As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.90%. This would have turned a $10K investment made 5 years ago into $12,108.15 today (as of 08/20/2019). On a total return basis, that’s a result of 21.10% (something to think about: how might AES shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that AES Corp. paid investors a total of $2.30/share in dividends over the 5 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).

Based upon the most recent annualized dividend rate of .546/share, we calculate that AES has a current yield of approximately 3.59%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .546 against the original $15.07/share purchase price. This works out to a yield on cost of 23.82%.

Here’s one more great investment quote before you go:
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” — Peter Lynch